Toby Eccles: Invest in social change

78,968 views ・ 2013-12-02

TED


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I'm here today to talk about social change,
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not a new therapy or a new intervention
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or a new way of working with kids or something like that,
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but a new business model for social change,
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a new way of tackling the problem.
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In Britain, 63 percent of all men
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who come out of short sentences from prison
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re-offend again within a year.
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Now how many previous offenses
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do you think they have on average
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managed to commit?
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Forty-three.
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And how many previous times do you think they've been in prison?
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Seven.
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So we went to talk to the Ministry of Justice,
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and we said to the Ministry of Justice,
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what's it worth to you
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if fewer of these guys re-offend?
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It's got to be worth something, right?
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I mean, there's prison costs,
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there's police costs, there's court costs,
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all these things that you're spending money on
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to deal with these guys. What's it worth?
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Now, of course, we care about the social value.
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Social Finance, the organization I helped set up,
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cares about social stuff.
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But we wanted to make the economic case,
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because if we could make the economic case,
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then the value of doing this would be completely compelling.
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And if we can agree on both a value
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and a way of measuring whether we've been
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successful at reducing that re-offending,
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then we can do something
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we think rather interesting.
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The idea is called the social impact bond.
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Now, the social impact bond is simply saying,
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if we can get the government to agree,
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that we can create a contract where
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they only pay if it worked.
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So that means that they can try out new stuff
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without the embarrassment
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of having to pay if it didn't work,
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which for still quite a lot of bits of government,
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that's a serious issue.
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Now, many of you may have noticed
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there's a problem at this point,
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and that is that it takes a long time to measure
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whether those outcomes have happened.
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So we have to raise some money.
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We use the contract to raise money
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from socially motivated investors.
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Socially motivated investors:
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there's an interesting idea, right?
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But actually, there's a lot of people who,
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if they're given the chance,
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would love to invest in something
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that does social good.
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And here's the opportunity.
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Do you want to also help government find
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whether there's a better economic model,
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not just leaving these guys to come out of prison
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and waiting till they re-offend and putting them back in again,
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but actually working with them
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to move to a different path
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to end up with fewer crimes
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and fewer victims?
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So we find some investors,
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and they pay for a set of services,
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and if those services are successful,
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then they improve outcomes,
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and with those measured reductions in re-offending,
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government saves money,
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and with those savings,
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they can pay outcomes.
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And the investors do not just get their money back,
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but they make a return.
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So in March 2010, we signed
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the first social impact bond
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with the Ministry of Justice
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around Peterborough Prison.
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It was to work with 3,000 offenders
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split into three cohorts of 1,000 each.
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Now, each of those cohorts
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would get measured over the two years
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that they were coming out of prison.
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They've got to have a year to commit their crimes,
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six months to get through the court system,
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and then they would be compared to a group
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taken from the police national computer,
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as similar as possible,
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and we would get paid
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providing we achieved a hurdle rate of 10-percent reduction,
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for every conviction event that didn't happen.
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So we get paid for crimes saved.
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Now if we achieved that 10-percent reduction
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across all three cohorts,
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then the investors get a seven and a half percent
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annualized return on their investment,
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and if we do better than that,
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they can get up to 13 percent
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annualized return on their investment,
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which is okay.
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So everyone wins here, right?
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The Ministry of Justice can try out a new program
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and they only pay if it works.
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Investors get two opportunities:
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for the first time, they can invest in social change.
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Also, they make a reasonable return,
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and they also know that
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first investors in these kinds of things,
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they're going to have to believers.
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They're going to have to care in the social program,
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but if this builds a track record
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over five or 10 years,
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then you can widen that investor community
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as more people have confidence in the product.
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The service providers, well, for the first time,
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they've got an opportunity to provide services
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and grow the evidence for what they're doing
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in a really constructive way and learn
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and demonstrate the value of what they're doing
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over five or six years, not just one or two
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as often happens at the moment.
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Society wins: fewer crimes, fewer victims.
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Now, the offenders, they also benefit.
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Instead of just coming out of the prison
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with 46 pounds in their pocket,
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half of them not knowing where they're spending
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their first night out of jail,
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actually, someone meets them in prison,
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learns about their issues,
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meets them at the gate,
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takes them through to somewhere to stay,
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connects them to benefits, connects them to employment,
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drug rehabilitation, mental health,
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whatever's needed.
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So let's think of another example:
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working with children in care.
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Social impact bonds work great
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for any area where there is at the moment
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very expensive provision that produces
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poor outcomes for people.
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So children in the state care
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tend to do very badly.
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Only 13 percent achieve a reasonable level
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of five GCSEs at 16,
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against 58 percent of the wider population.
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More troublingly, 27 percent of offenders in prison
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have spent some time in care.
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And even more worryingly,
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and this is a Home Office statistic,
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70 percent of prostitutes
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have spent some time in care.
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The state is not a great parent.
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But there are great programs
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for adolescents who are on the edge of care,
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and 30 percent of kids going into care
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are adolescents.
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So we set up a program with Essex County Council
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to test out intensive family therapeutic support
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for those families with adolescents
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on the edge of the care system.
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Essex only pays in the event
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that it's saving them care costs.
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Investors have put in 3.1 million pounds.
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That program started last month.
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Others, around homelessness in London,
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around youth and employment and education
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elsewhere in the country.
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There are now 13 social impact bonds in Britain,
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and amazing levels of interest in this idea
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all over the world.
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So David Cameron's put 20 million pounds
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into a social outcomes fund to support this idea.
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Obama has suggested 300 million dollars
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in the U.S. budget for these kinds of ideas
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and structures to move it forward,
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and a lot of other countries
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are demonstrating considerable interest.
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So what's caused this excitement?
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Why is this so different for people?
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Well, the first piece, which we've talked about,
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is innovation.
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It enables testing of new ideas
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in a way that's less difficult for everybody.
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The second piece it brings is rigor.
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By working to outcomes, people really have to test
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and bring data into the situation that one's dealing with.
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So taking Peterborough as an example,
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we add case management
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across all of the different organizations that we're working with
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so they know
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what actually has been done with different prisoners,
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and at the same time they learn
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from the Ministry of Justice, and we learn,
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because we pushed for the data,
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what actually happens, whether they get re-arrested or not.
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And we learn and adapt the program accordingly.
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And this leads to the third element, which is new,
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and that's flexibility.
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Because normal contracting for things,
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when you're spending government money,
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you're spending our money, tax money,
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and the people who are in charge of that are very aware of it
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so the temptation is to control exactly how you spend it.
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Now any entrepreneur in the room knows
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that version 1.0, the business plan,
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is not the one that generally works.
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So when you're trying to do something like this,
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you need the flexibility to adapt the program.
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And again, in Peterborough, we started off
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with a program, but we also collected data,
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and over the period of time,
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we nuanced and changed that program
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to add a range of other elements,
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so that the service adapts
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and we meet the needs of the long term
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as well as the short term:
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greater engagement from the prisoners,
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longer-term engagement as well.
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The last element is partnership.
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There is, at the moment, a stale debate going on very often:
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state's better, public sector's better,
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private sector's better, social sector's better,
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for a lot of these programs.
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Actually, for creating social change,
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we need to bring in the expertise
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from all of those parties
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in order to make this work.
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And this creates a structure
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through which they can combine.
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So where does this leave us?
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This leaves us with a way
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that people can invest in social change.
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We've met thousands, possibly millions of people,
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who want the opportunity to invest in social change.
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We've met champions all over the public sector
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keen to make these kinds of differences.
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With this kind of model,
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we can help bring them together.
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Thank you.
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(Applause)
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